The Relationship Between Comme

(Abdel Kader Mohamed Ahmed Abd Al)

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Abstract

The main objective of this paper was to examine the relationship between the performance and risk in the commercial banking industry in Saudi Arabia. The performance indicators included were earrings per share, dividend pay out ratio the ratio of total loans to total deposits, the ratio of equity to total deposits, return on assets and loan loss reserve. Total risk was measured by the standard deviation while systematic risk was expressed in terms of beta. Data on the dependent and the independent variables were obtained for 10 commercial banks operating in the Saudi Stock market for the period 1990-1999. The impact of the performance indicators on the risk measures was tested using both OLS and Spearman’s rank correlation methods. The results produced by these models were mixed and did not compare favourably with previous studies carried out in some developed stock markets. Moreover, some of the independent variables failed to meet the hypothesized relationships and explain variability in the risk measures significantly such as dividend pay out ratio, the ratio of equity to total deposits and loan loss reserve. Others such as EPS and NA have significant relationship.
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